@oldfool,
Ouch. First of all I wanna say that I feel for your situation. When there is a problem in a marriage it gets ignored and leads to things like this. Was there any indication your wife wasnt happy? Did you know but not act?
I say as hard as it might be to confront but she sounds set. I dont think there is really anything you can do to change her mind. By all means you can try but it might bring more heartache.
I wouldnt go the revenge route and I know your beliefs make you feel like trying to solve it. But shes the one who has betrayed the marriage, not you so you shouldnt punish yourself over it.
You really dont want her having the best of both worlds, you providing her a place and support and allowing her to continue her affair.
You should decide for yourself what is important for you. I would cut her off. Walk a way. Maybe you might luck out yourself and find a hot 20 something who likes you for you. I know that might contradict your beliefs but you dont deserve to punish yourself.